Brokers Yawn Over Shuffling Executives at Smith Barney; BOMs Are More Important

Attention branch managers: Your job may have a lot more significance than that of your company’s CEO—at least when it comes to the reps you manage. That was the overwhelming result of an informal poll we took of Smith Barney advisors after the firm’s Jan. 22 announcement that Sallie Krawcheck, its CFO, would return to her role as CEO of global wealth management, and that Todd Thomson, who had held the position, would leave the company.

Attention branch managers: Your job may have a lot more significance than that of your company’s CEO—at least when it comes to the reps you manage. That was the overwhelming result of an informal poll we took of Smith Barney advisors after the firm’s Jan. 22 announcement that Sallie Krawcheck, its CFO, would return to her role as CEO of global wealth management, and that Todd Thomson, who had held the position, would leave the company.

Krawcheck, who had been chairman and CEO of research outfit Sanford Bernstein before she left in 2002 to take over as head of retail at Citigroup, swapped roles with then-CFO Thomson in 2004. She was CEO of Citi’s wealth-management unit for only two years, but was nonetheless credited with boosting broker morale and production. Her time as CFO, however, was less successful, say analysts.

Industry insiders suggested that Thomson—nicknamed “the Todd Mahal” for his supposed vanity—was dismissed for failing to rein in costs—shuttling around CNBC’s Maria Bartiromo in the Citigroup jet was considered the last straw in extravagance, sources say. (For example, in the wealth-management unit, expenses rose 20 percent in the fourth quarter of 2006 compared to the same period a year earlier.) According to a statement, Thomson left “to pursue other interests.”

While advisors are said to be pleased to have Krawcheck back—Mrs. Clean, as she is known—many advisors we spoke to about this changing of the guard were unconcerned, saying it would have minimal affect upon their daily lives. Rather, it’s local management—specifically, BOMs—who are more integral to advisors’ job performance and satisfaction.

A 20-year veteran Smith Barney advisor in the northeast sums that sentiment up best: “In general, I don’t think it really matters too much to reps who’s at the helm of the firm. Sure, you like to see good people at the top, and I like Sally Krawcheck. But, we’re so far removed from these folks. Branch managers are much more important to us. Basically, if you have a good manager, everything’s great; if you have a bad one, everything’s miserable.”

A 25-year Smith Barney rep in Texas agrees, but makes the point: “What they [BOMs] are able to do for us can be affected by who is at the top.”

A 30-year veteran Smith Barney rep in New York City echoes the sentiment. “This company is so big that its overall management has little to do with our lives. What does affect us is when they strip branch managers of their authority and everything becomes compliance heavy.” That’s been a big gripe among reps at his firm over the last five years, he says. “Sallie Krawcheck hasn’t been in our shoes. But neither has Todd Thomson. So, as far as I’m concerned, they’re interchangeable.”

Andre Cappon, president of the CBM Group, a New York-based financial consulting group, agrees. “When a good BOM leaves,” he says, “oftentimes, a lot of reps leave with him.” You can have defections when the leadership of a firm changes, Cappon says, since who is at the top affects the firm’s culture. “But, at Smith Barney, upper management runs like a well-oiled machine, so it may not matter much to reps who’s at the top.” Plus, a lot of these brokers have golden handcuffs on them, he says. “I think who’s in charge may have direct impact on reps at smaller firms. At the wirehouses, the most important [internal] relationships reps have usually go only one or two rungs up.”

The attributes that make for great mangers, these advisors say, are good, solid leadership and the ability to maintain high branch morale. “If a manager doesn’t demonstrate professional excellence in his own work, or recognize and reward it in us, it is hard for us to be motivated to be our best,” says one Smith Barney rep in Massachusetts. The things they disliked most in managers were an indifference to the work ethic of their reps, working short hours and recognizing and rewarding high-commission trades executed by brokers, even when the quality of the business is poor.

While a BOM can have a profound impact on his reps, the job can be thankless. Says one 20-year wirehouse BOM, “My experience is that when a manager is doing a great job, the reps will say, ‘He’s fine, but a manager doesn’t really impact my business.’ When they’re doing a bad job, that’s when the manager is very much noticed by his reps.”

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